Forecast: Real Estate Investing 2019

In 2017, it was predicted that the housing market could expect increased interest rates, construction and price growth. However, none of those things happened–at least at the level expected. Instead, prices increased and mortgage rates remained stagnant, and the housing market got hotter. Now in 2018, the same results seem to be occurring as the real estate industry is now expected to be stronger throughout the rest of 2018, according to the Urban Land Institute (ULI) Center for Capital Markets and Real Estate which bases its predictions off of a semi-annual survey of 48 of the nation’s leading economists and industry analysts. The latest survey suggests that the real estate industry should expect a boost from the enactment of the Tax Cuts and Jobs Act (TCJA) in December of 2017.

Survey participants had high expectations for U.S. economic growth in the real estate industry, which is expected to be accompanied by higher inflation and higher interest rates, although the rate hikes aren’t expected to be detrimental to 2018 real estate returns. While different property sectors have seen various performance rates, there is no sign of an imbalance in 2018 that would send the real estate sector into a significant downturn.

The U.S. housing market anticipated another strong year with a rise in prices and construction. Despite the various housing market crash forecasts over the last four years and a lack of housing inventory, home prices and rental prices have continued to rise. According to Zillow Research, the median home value in June 2017 was up 8.3% from last June and the median rent has increased by 1.3% in the last year. The housing market is stable, optimistic, and backed by a strong economic forecast. Here are a few key economic impacts on real estate investing in 2019.

Single-family homes – There has been a shortage of single-family homes for sale, and the forecast shows no sign of a correction. The outlook for 2018 single-family homes is lower than previously anticipated, although 2019 and 2020 are expected to see a rise in homes for sale. While the shortage continues to impact 2018, housing prices have only risen, by an average of 5.3%, and is expected to rise another 4.3% in 2019– both above the 20-year average annual growth rate of 4%.

Industrial – The rental growth rate for 2018 outlook is at 4.6 percent, though it is expected to slow to 3.8% in 2019 and down to 3% in 2020. Availability rates outlook in 2018 is well below the 20-year average of 10.1 percent with 7.4%. Rates are expected to remain below long-term average at 3.8% in 2019 and 3% in 2020. Ten percent industrial returns are expected in 2018, with declines in following years, reaching eight percent in 2020.

Apartment- Vacancy rates are expected to rise to 5 percent by the end of 2018, with a slight increase in 2019 to 5.2% where it is predicted to remain throughout 2020– below the 20-year average of 5.4 percent. 2018 forecast shows rent growth decreasing from 2.1% to 1.5%, although rates are projected to rise to 2 percent in 2019 and 2020.